3 Material accounting policies

3.1 Foreign currency transactions

Transactions in foreign currencies are translated
into the functional currency of the Company, at the
exchange rates at the dates of the transactions or
an average rate if the average rate approximates the
actual rate at the date of the transaction.

Monetary assets and liabilities denominated in
foreign currencies are translated into the functional
currency at the exchange rate at the reporting date.
Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are translated into
the functional currency at the exchange rate when the
fair value was determined. Non-monetary assets and
liabilities that are measured based on historical cost
in a foreign currency are translated at the exchange

rate at the date of the transaction. Foreign currency
exchange differences are recognised in profit or loss,
except exchange differences arising from translation
of qualifying cash flow hedges to the extent that the
hedges are effective, which are recognised in Other
Comprehensive Income.

3.2 Financial instruments

i. Recognition and initial measurement

Trade receivables (except a trade receivable with
a significant financing component) are initially
recognised when they are originated. All other
financial assets and financial liabilities are initially
recognised when the Company becomes a party
to the contractual provisions of the instrument.

On initial recognition, a financial asset (unless
it is a trade receivable without a significant
financing component) is recognised at fair value.
In case of financial assets which are recognised
at fair value through profit and loss (FVTPL), its
transaction cost is recognised in the statement
of profit and loss. In other cases, the transaction
cost is attributed to the acquisition value of the
financial asset.

ii. Classification and subsequent measurement
Financial assets

On initial recognition, a financial asset (unless it is
a trade receivable without a significant financing
component) is classified as measured at

- amortised cost;

- Fair value through other comprehensive income
(FVOCI) - equity investment; or

-FVTPL

Financial assets are not reclassified subsequent
to their initial recognition, except if and in the
period the Company changes its business model
for managing financial assets.

A financial asset is measured at amortised cost if
it meets both of the following conditions and is not
designated as at FVTPL:

- the asset is held within a business model
whose objective is to hold assets to collect
contractual cash flows; and

- the contractual terms of the financial asset
give rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.

For the purposes of this assessment, 'principal'
is defined as the fair value of the financial asset
on initial recognition. 'Interest' is defined as
consideration for the time value of money and
for the credit risk associated with the principal
amount outstanding during a particular period of
time and for other basic lending risks and costs
(e.g. liquidity risk and administrative costs), as
well as a profit margin.

On initial recognition of an equity investment
that is not held for trading, the Company may
irrevocably elect to present subsequent changes
in the investment's fair value in OCI (designated
as FVOCI - equity investment). This election is
made on an investment- by- investment basis.

All financial assets not classified as measured
at amortised cost as described above are
measured at FVTPL. This includes all derivative
financial assets. On initial recognition, the
Company may irrevocably designate a financial
asset that otherwise meets the requirements to
be measured at amortised cost as at FVTPL if
doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.

Financial liabilities: Classification,

subsequent measurement and gains and
losses

Financial liabilities are classified as measured
at amortised cost or FVTPL. A financial liability
is classified as at FVTPL if it is classified
as held-for-trading, or it is a derivative or it
is designated as such on initial recognition.
Financial liabilities at FVTPL are measured at
fair value and net gains and losses, including
any interest expense, are recognised in profit or
loss. Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method. Interest expense and foreign
exchange gains and losses are recognised in
profit or loss. Any gain or loss on derecognition is
also recognised in profit or loss.

iii. Derecognition
Financial assets

The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire, or it transfers the
rights to receive the contractual cash flows in a
transaction in which substantially all of the risks

and rewards of ownership of the financial asset
are transferred or in which the Company neither
transfers nor retains substantially all of the risks
and rewards of ownership and does not retain
control of the financial asset.

If the Company enters into transactions whereby it
transfers assets recognised on its balance sheet,
but retains either all or substantially all of the risks
and rewards of the transferred assets, in these
cases transferred assets are not derecognised.

Financial liabilities

The Company derecognises a financial liability
when its contractual obligations are discharged
or cancelled, or expire.

The Company also derecognises a financial
liability when its terms are modified and the cash
flows under the modified terms are substantially
different. In this case, a new financial liability
based on the modified terms is recognised at
fair value. The difference between the carrying
amount of the financial liability extinguished and
the new financial liability with modified terms is
recognised in profit or loss.

iv. Offsetting

Financial assets and financial liabilities are offset
and the net amount presented in the balance
sheet when, and only when, the Company
currently has a legally enforceable right to set off
the amounts and it intends either to settle them
on a net basis or to realise the asset and settle
the liability simultaneously.

v. Derivative financial instruments and hedge
accounting

The Company holds derivative financial
instruments to hedge its foreign currency
exposures. Embedded derivatives are separated
from the host contract and accounted for
separately if the host contract is not a financial
asset and certain criteria are met.

Derivatives are initially measured at fair value.
Subsequent to initial recognition, derivatives
are measured at fair value, and changes

therein are generally recognised in statement of
profit and loss.

The Company designates certain derivatives
as hedging instruments to hedge the variability
in cash flows associated with highly probable
forecast transactions arising from changes in
foreign exchange rates.

At inception of designated hedging relationships,
the Company documents the risk management
objective and strategy for undertaking the
hedge. The Company also documents the
economic relationship between the hedged
item and the hedging instrument, including
whether the changes in cash flows of the hedged
item and hedging instrument are expected to
offset each other.

Cash flow hedges

When a derivative is designated as a cash
flow hedging instrument, the effective portion
of changes in the fair value of the derivative is
recognised in OCI and accumulated in other
equity under 'effective portion of cash flow
hedges'. The effective portion of changes in the
fair value of the derivative that is recognised
in OCI is limited to the cumulative change in
fair value of the hedged item, determined on a
present value basis, from inception of the hedge.
Any ineffective portion of changes in the fair
value of the derivative is recognised immediately
in statement of profit and loss.

If a hedge no longer meets the criteria for hedge
accounting or the hedging instrument is sold,
expires, is terminated or is exercised, then
hedge accounting is discontinued prospectively.
When hedge accounting for cash flow hedges
is discontinued, the amount that has been
accumulated in other equity remains there
until, for a hedge of a transaction resulting in
recognition of a non-financial item, it is included
in the non-financial item's cost on its initial
recognition or, for other cash flow hedges, it is
reclassified to profit and loss in the same period
or periods as the hedged expected future cash
flows affect profit and loss.

If the hedged future cash flows are no longer
expected to occur, then the amounts that have
been accumulated in other equity are immediately
reclassified to statement of profit and loss.

vi. Cash and cash equivalents

Cash and cash equivalent in the balance sheet
comprise cash at banks and on hand and
short-term deposits with an original maturity of
three months or less, which are subject to an
insignificant risk of changes in value. For the
purpose of the statement of cash flows, cash and
cash equivalents consist of cash and short-term
deposits, as defined above, net of outstanding
bank overdrafts as they are considered an integral
part of the Company's cash management.

Cash dividend to equity holders
The Company recognises a liability to make
cash to equity holders when the distribution is
authorised and the distribution is no longer at the
discretion of the Company. As per the corporate
laws in India, a distribution is authorised when it
is approved by the shareholders. A corresponding
amount is recognised directly in equity.
Interim dividends are recorded as a liability
on the date of declaration by the Company's
Board of Directors.

3.3 Property, plant and equipment

i. Recognition and measurement

Items of property, plant and equipment (including
capital work-in progress) are measured at cost,
which includes capitalised borrowing costs, less
accumulated depreciation and accumulated
impairment losses, if any.

Cost of an item of property, plant and equipment
comprises its purchase price, including import
duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any
directly attributable cost of bringing the item to
its working condition for its intended use and
estimated cost of dismantling and removing the
item and restoring the site on which it is located.

Depreciation method, useful lives and residual
values are reviewed at each financial year end and
adjusted if appropriate. Based on Management's
evaluation, estimates of useful lives as given
above best represent the period over which
management expects to use these assets.

Depreciation on additions (disposals) is provided
on a pro-rata basis i.e. from (up to) the date on
which asset is ready for use (disposed off).

iv. Capital work-in-progress

Capital work-in-progress includes property, plant
and equipment which are in process of being
ready for its intended use and it is probable that
the expected future economic benefits, that are
attributable to the asset will flow to the entity and
the cost of the asset can be measured reliably.

3.4 Intangible assets

i. Recognition and measurement

Intangible assets including those acquired by
the Company are initially measured at cost.
Such intangible assets are subsequently
measured at cost less accumulated amortization
and any accumulated impairment losses.

ii. Subsequent expenditure

Subsequent expenditure is capitalised only
when it increases the future economic benefits
embodied in the specific asset to which it relates.
All other expenditure including expenditure on
internally generated assets is recognised in profit
or loss as incurred.

iii. Amortisation

Amortisation is calculated to write off the cost of
intangible assets less their estimated residual
values over their estimated useful lives using
the straight-line method, and is included in
depreciation and amortization in Statement of
Profit and Loss.

Amortisation method, useful lives and residual
values are reviewed at the end of each financial
year and adjusted if appropriate.

iv. Intangible assets under development

Intangible assets under development includes
intangible assets which are in process of being
ready for its intended use and it is probable that
the expected future economic benefits that are
attributable to the asset will flow to the entity and
the cost of the asset can be measured reliably.

3.5 Inventories

Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on the
weighted average formula, and includes expenditure
incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing
them to their present location and condition. In the case
of manufactured inventories and work-in-progress,
cost includes an appropriate share of fixed production
overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs
of completion and selling expenses. The net realisable
value of work-in-progress is determined with reference
to the selling prices of related finished products.

Raw materials, components and other supplies held for
use in the production of finished products are not written
down below cost except in cases where material prices
have declined and it is estimated that the cost of the
finished products will exceed their net realisable value.

The comparison of cost and net realisable value is
made on an item-by-item basis.

3.6 Impairment

i. Impairment of financial instruments

In accordance with Ind AS 109, the Company
applies expected credit loss (“ECL”) model for
measurement and recognition of impairment loss
on financial assets measured at amortised cost.

Loss allowance for trade receivables with no
significant financing component is measured
at an amount equal to lifetime expected credit
losses. For all other financial assets, ECL are
measured at an amount equal to the 12-month
ECL, unless there has been a significant increase
in credit risk from initial recognition in which case
those are measured at lifetime ECL.

Loss allowance for financial assets measured at
amortised cost are deducted from gross carrying
amount of the assets.

The gross carrying amount of a financial asset is
written off (either partially or in full) to the extent
that there is no realistic prospect of recovery.
This is generally the case when the Company
determines that the debtor does not have
assets or sources of income that could generate
sufficient cash flows to repay the amounts subject
to the write-off. However, financial assets that are
written off could still be subject to enforcement
activities in order to comply with the Company's
procedures for recovery of amounts due.

ii. Impairment of non-financial assets

The Company assess at each reporting date
whether there is any indication that the carrying
amount may not be recoverable. If any such
indication exists, then the asset's recoverable
amount is estimated and an impairment loss is
recognised if the carrying amount of an asset or
CGU exceeds its estimated recoverable amount
in the statement of profit and loss. Goodwill is
tested annually for impairment.

The Company's non-financial assets, inventories
and deferred tax assets, are reviewed at each
reporting date to determine whether there is any
indication of impairment. If any such indication
exists, then the asset's recoverable amount is

estimated. For impairment testing, assets that
do not generate independent cash inflows are
grouped together into cash-generating units
(CGUs). Each CGU represents the smallest
group of assets that generates cash inflows that
are largely independent of the cash inflows of
other assets or CGUs.

Impairment loss recognised in respect of a CGU
is allocated first to reduce the carrying amount
of any goodwill allocated to the CGU, and then
to reduce the carrying amounts of the other
assets of the CGU (or groups of CGUs) on a
pro rata basis.

An impairment loss in respect of goodwill is not
subsequently reversed. In respect of other assets
for which impairment loss has been recognised
in prior periods, the Company reviews at each
reporting date whether there is any indication
that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been
a change in the estimates used to determine
the recoverable amount. Such a reversal is
made only to the extent that the asset's carrying
amount does not exceed the carrying amount that
would have been determined, net of depreciation
or amortisation, if no impairment loss had
been recognised.

3.7 Employee benefits

i. Short-term employee benefits

Short-term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related service is provided.
A liability is recognised for the amount expected
to be paid e.g., under short-term bonus, if the
Company has a present legal or constructive
obligation to pay this amount as a result of
past service provided by the employee, and the
amount of obligation can be estimated reliably.

ii. Gratuity

The Company provides for gratuity, a defined
benefit plan (“the Gratuity Plan”) covering the
eligible employees of the Company. The Gratuity
Plan provides a lump-sum payment to vested
employees at retirement, death, incapacitation or

termination of employment, of an amount based
on the respective employee's salary and the
tenure of the employment with the Company.

Liability with regard to the Gratuity Plan are
determined by actuarial valuation, performed by
an independent actuary, at each balance sheet
date using the projected unit credit method.
The defined benefit plan is administered by fund
administered by Life Insurance Corporation of
India for this purpose.

The Company recognises the net obligation of a
defined benefit plan as a liability in its balance
sheet. Gains or losses through re-measurement
of the net defined benefit liability are recognised
in other comprehensive income and are not
reclassified to profit and loss in the subsequent
periods. The actual return of the portfolio of plan
assets, in excess of the yields computed by
applying the discount rate used to measure the
defined benefit obligation is recognised in other
comprehensive income. When the benefits of a
plan are changed or when a plan is curtailed, the
resulting change in benefit that relates to past
service ('past service cost' or 'past service gain')
or the gain or loss on curtailment is recognised
immediately in profit or loss. The Company
recognises gains and losses on the settlement of
a defined benefit plan when the settlement occurs.

iii. Provident fund

Eligible employees of the Company receive
benefits from provident fund, which is a defined
contribution plan. Both the eligible employees
and the Company make monthly contributions
to the Government administered provident fund
scheme equal to a specified percentage of the
eligible employee's salary. Amounts collected
under the provident fund plan are deposited with
in a government administered provident fund.
The Company has no further obligation to the
plan beyond its monthly contributions.

iv. Compensated absences

The Company has a policy on compensated
absences which are both accumulating and
non-accumulating in nature. The expected cost

of accumulating compensated absences is
determined by actuarial valuation performed by
an independent actuary at each balance sheet
date using the projected unit credit method
on the additional amount expected to be paid/
availed as a result of the unused entitlement
that has accumulated at the balance sheet date.
Expense on non-accumulating compensated
absences is recognised is the period in which the
absences occur.

v. Share-based payment transactions

The grant date fair value of equity settled
share-based payment awards granted to
employees is recognised as an employee
expense, with a corresponding increase in equity,
over the period that the employees unconditionally
become entitled to the awards. The amount
recognised as expense is based on the estimate
of the number of awards for which the related
service and non-market vesting conditions
are expected to be met, such that the amount
ultimately recognised as an expense is based on
the number of awards that do meet the related
service and non-market vesting conditions at the
vesting date. Grant date fair value of the equity
settled share-based payment awards granted to
the employees of group companies is recognised
as a receivable from the group Company, with a
corresponding adjustment to equity.